Nama surplus for taxpayers forecast to reach €4.5bn

Nama will deliver a €4.5bn surplus over its life – around €1bn more than its own latest estimates, according to Investec.

Last year the State’s bad bank redeemed the last of its €32bn startup costs, so the balance left when it is wound up will be returned to taxpayers and in effect goes to reduce the overall costs of the bank bailout.

At current projections, the Nama surplus combined with recoveries from AIB, Bank of Ireland and Permanent TSB will take the final bailout bill well below the €30bn mark.

Investec Ireland yesterday predicted the organisation will wind up posting a total surplus of €4.5bn – boosted by the rise in house prices.

Investec’s Philip O’Sullivan’s upgraded Nama projections have been consistently borne out to date.

The revised figures were contained in Investec’s latest quarterly update on the economy, which highlighted a 13pc year-on-year increase in house prices in April amid an ongoing “disconnect between housing output and demand”.

Last week Nama, which is working on the redevelopment of key areas of Dublin’s docklands with the likes of Ballymore Properties and Kennedy Wilson, revised its own final profit forecast to €3.5bn, a 17pc increase on its previous estimate of €3bn.

But Investec has adopted a far more optimistic stance, arguing the organisation stands to deliver a much greater surplus to the State by the time it closes its doors in 2020.

Hefty increase in house prices and Nama’s profitable business model underpins this view, fuelling debate over whether the agency has adopted a too conservative approach and will end up overshooting its own estimates.

Last year the agency raked in €2.56bn from selling loans and property, enabling the organisation to repay the final €2.6bn of its €30.2bn senior debt.

It remains a powerful player in the housing market funding the construction of tens of thousands of homes.

Investec Ireland’s chief economist Philip O’Sullivan, pointed out Nama stands to benefit from “further write-backs from its €1.4bn stock of provisions as property values climb” and highlighted its net interest margin – a measure of profitability – reached a “remarkable” 7pc in 2017.

But others in the market argue Nama has sold its most valuable real estate portfolios and is now dealing with secondary sites, and point out the agency has little to gain from underplaying its final profit targets.

Yet Nama retains control of pivotal sites in the capital, including the Irish Glass Bottle land in Ringsend, Dublin, which can accommodate 3,500 homes.

There is little prospect though of the agency continuing into the next decade with Finance Minister Paschal Donohoe insisting last week that he has no plans to extend Nama’s life beyond 2020, when it is due to be disbanded. That’s despite some calls for the agency to be restructured as a national housebuilding authority.